60/40 Portfolio Fades As Advisors Embrace Hedge-Fund-Style ETFs For A New Era

Step aside, 60/40. A new paradigm for portfolios is arising, centered on alternative strategies provided through the efficiency and transparency of ETFs.

As inflation, geopolitics, and volatility challenge traditional portfolios, advisors are moving beyond the classic 60/40 mix—favoring tactical, tradeable alternative strategy ETFs that offer hedge-fund-like flexibility.

Following State Street’s 2025 ETFs in Focus study, over 75% of advisors intend to grow exposure to alternative ETF strategies in the next 12–18 months. That’s not simply a trend; it’s a seismic shift in portfolios.

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The New Menu: Real Estate, Private Equity, And Liquid Alts

Advisors favor real assets when going alternative—50% choose real estate, followed by private equity (44%) and digital assets (32%). Demand is also rising for commodities, managed futures, and long/short equity, all within ETF structures.

What's driving the shift? A need to reduce public market risk. With inflation rising and bonds less stable, 45% of advisors cite cutting market exposure, while 44% seek new return sources.

The Secret Sauce

Alternative ETFs offer what hedge funds lack: liquidity and transparency. While 81% of advisors say ETFs improve access to alternatives, 37% cite valuation complexity and 35% note client confusion as hurdles.

Still, demand is growing. Over 57% of advisors use them strategically for long-term risk management, with nearly half enhancing traditional hedges through these tools.

Fees & Innovation

High fees remain a concern for 38% of advisors, but ETF fee compression is pushing managers to deliver hedge-fund-like strategies at lower costs.

Innovation is also accelerating, with multi-strategy ETFs, buffer funds, and semi-transparent active products reshaping the landscape—fast enough to outpace a “Sharpe ratio” mention.

Also Read: New Innovator ETF Targets Rolling Downside Protection With Up To 50% Equity Upside

ETFs To Watch

Following are three ETFs that fit well with the theme of advisors moving away from the conventional 60/40 portfolio and looking towards alternative strategies through ETFs:

iMGP DBi Managed Futures Strategy ETF (NYSE:DBMF)

Why it fits: DBMF offers managed futures exposure, tracking top CTAs across equities, bonds, commodities, and currencies. It delivers uncorrelated returns and downside protection—bringing a hedge-fund approach with ETF transparency.

Most significant benefit: Hedge-fund-like strategy with ETF-level transparency.

First Trust Real Asset Income ETF (NASDAQ:FTRI)

Why it fits: FTRI offers broad exposure to real assets—including REITs, infrastructure, energy, and natural resources—aligning with advisors' top alternative pick. It's built to deliver income and inflation protection.

Primary benefit: Income-generating real asset exposure.

Invesco Global Listed Private Equity ETF (NYSE:PSP)

Why it fits: PSP taps into the popularity of private equity by offering exposure to publicly traded firms involved in PE, like BDCs and asset managers. While not a direct substitute for traditional private equity, it provides a liquid, lower-cost way to access the space.

Key benefit: Private equity exposure without lockups.

The Bottom Line

For advisors, the message is clear: the 60/40 isn’t dead, but it’s no longer the default. Today’s portfolio is dynamic, defensive, and more defined by ETF innovation.

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